Document Type

Case Study

Case Series

Broad-Based Emergency Liquidity

JEL Codes

G01, G28


As the United States prepared for the century date change (Y2K) on January 1, 2000, uncertainty about computer functioning generated uncertainty in capital markets. The Federal Reserve (Fed) grew particularly concerned that computer malfunctioning would cause disruptions in the short-term federal funds and repurchase agreement (repo) markets. Many market participants indicated early in 1999 that they would restrict their normal trading activities in the weeks leading up to Y2K, which contributed to the Fed’s concern that liquidity might dry up. To ease pressures, the Fed created two special facilities through the Open Market Trading Desk of the Federal Reserve Bank of New York (FRBNY). The Standby Financing Facility (SFF) auctioned three sets of options for overnight repos for dates around the year’s end to primary dealers. The Fed created the SFF to enable primary dealers to continue market-making and normal intermediation activities in securities markets in order to sustain the liquidity of these markets around the century date change. All told, the SFF auctioned $481 billion of options, though none were exercised. The Fed also created the Special Liquidity Facility (SLF) to provide term-collateralized funding to depository institutions around the year’s end, which we describe in a separate YPFS case (see Leonard 2022).

Date Revised